It’s no secret student loan debt is a growing national problem, and Colorado is no exception; more than 761,000 Coloradans owe $24.75 billion in student debt.
As the cost of college continues to rise, and the burden of paying for school falls on students and their families, more and more Coloradans turn to student loans to cover tuition expenses — especially students of color and those from low-income backgrounds. Yet as borrowers and their families work to make good on the investment they put into their college experience and themselves, the very entities meant to fairly manage the repayment process — loan servicers — can end up making that process much more difficult.
Not only does student debt significantly burden our state’s economy, student loans are also still the only type of major loan that doesn’t require the people who service them to be licensed, nor do they have to follow rules on par with mortgages, credit cards, or car loans. That lack of oversight opens the door for routine misconduct and predatory behavior. In fact, the largest servicer in the country, Navient (formerly Sallie Mae), faces multiple lawsuits for defrauding 1.5 million borrowers and adding over $4 billion to the cost of student borrowers’ loans. Coloradans increasingly report many student loan servicers inappropriately and inaccurately discourage borrower-friendly alternative payment plans that could save borrowers money, fail to respond to questions and payment processing errors, and fail to provide sufficient information to borrowers regarding payments, interest rates, and eligibility for benefits such as loan forgiveness.
At the very least, the process of repaying student loans should be a fair and transparent one. That’s why the Financial Equity Coalition, along with veterans groups, consumer advocates, teachers, and young borrowers are banding together to seek solutions to this issue at the state level. We should bring sensible oversight of loan servicers in line with every other kind of consumer loan provider in the state, including licensing servicers and ensuring they follow basic ground rules for interacting with borrowers. We should pursue efforts to increase transparency and ensure borrowers can access the quickest, least costly repayment methods on their student debt. Together, these simple changes will allow Coloradans to more effectively balance repaying student debt with other investments, such as homeownership, that build our economy.
Failures within the student loan servicing industry are eerily similar to those prevalent within the mortgage industry that precipitated the Great Recession of 2008. We won’t sit back and allow these servicers to continue to fail Colorado consumers. We look forward to continuing to work with Colorado’s leaders to make these changes.
By Charley Olena, Advocacy Director at New Era Colorado